Sales of new private homes up 37% on-month in May

Sales of new private homes up 37% on-month in May

By Irene Chan/ Ng Baoying,

SINGAPORE: Sales of uncompleted private homes climbed 37 per cent on-month in May as improving market sentiments and optimism of an economic recovery spurred more home buyers to snap up properties.

A total of 1,668 units were sold last month, up from 1,214 in April, bringing the total number of units sold in 2009 to 5,526. This is more than the 4,435 units sold for the whole of last year. But it remains lower than the market peak of 14,811 sold in 2007.

Home sales in the mid-tier market picked up pace in May. The developments that sold the most units last month were Martin Place, The Wharf, The Arte and The Mezzo.

These four projects, which are in the prime districts and the city fringe areas, made up more than 30 per cent of the sales.

The median price for these developments ranged between S$903 and S$1,423 per square foot.

Deputy managing director of agency and business services, Colliers International, Grace Ng, said: “There are more properties sold above S$1,000 per square foot. For example, in the month of April, the percentage of properties sold above S$1,000 per square foot is about 28 per cent. In May, this crept up to 29 per cent.

“It seems like physical property prices have corrected more in these categories. In the core central region, property prices corrected over 15 per cent. In the outside central region, it contracted about 16, 17 per cent.”

Sales of mid-tier and mass-market developments remained strong.

Projects that had a median price of less than S$900 per square foot made up 45.9 per cent of the total units sold.

Analysts say the buoyant sales could be credited to the upswing in the stock markets.

Associate director of ERA Asia Pacific, Eugene Lim, said: “The current rally is predominantly driven by the upswing in the stock market. Over the past months, we saw the stock market rally, not only in Singapore, but across Asia. This improved sentiments among investors and this is probably the main reason behind people buying units today.”

Most analysts say it is uncertain if the coming months will see similar sales, but they expect at least 1,000 sales a month.

Ng said: “We expect that the number of units sold will still be above 1,000 in the month of June and the next few months. But whether it is sustainable will depend on a few factors — like whether there is a sustained recovery in the property market, whether there are clear signs of declining exports, and whether the developer will increase prices.”

And should the momentum persist, analysts say the total number of units sold this year may exceed 10,000.

Lim said: “With the current momentum, we do expect to see more launches coming up. So buyers will have more choice. We will see the momentum continuing unless the market changes for the worse.”

And analysts say prices are unlikely to increase much despite strong sales. This is because developers are more focused on clearing stock, rather than making high profits in the current environment.

Lim said: “The main agenda of developers today is to clear stock. And they will be very focused on pricing it competitively to move units rather than go for high profits.”

Developers launched a total of 1,161 units in May, up seven per cent compared to April.

- CNA/yt

Source : Channel NewsAsia - 16 June 2009

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A merry May for home sales

A merry May for home sales

Figure at near record level, with prime areas doing particularly well

By Joyce Teo

SALES of new private homes rocketed last month, thanks to price cuts and the share market rally boosting buyer confidence.
Recession-defying numbers out yesterday showed there were 1,668 units sold in May, just a tad below the all-time high of 1,731 set in the boom-time month of August 2007.

Last month’s figure was also well ahead of the already-strong developer sales of 1,214 units in April and 1,220 in March.

PropNex chief executive Mohamed Ismail cited recent rallying of the stock markets and launches by developers at attractive prices as reasons for what he described as outstanding sales last month.

Many speculators who had been sitting on the fence were spurred into action, hoping to take advantage of the low prices in the market across all levels, he said.

Other experts cited pent-up demand and buyers’ fear of missing the boat as explanations for the sales spike.

Developers stepped up a gear last month as well, launching 1,161 new homes, up from 1,085 in April, according to Urban Redevelopment Authority data.

The total sales of 2,882 units recorded in April and last month exceeded first-quarter sales by 11 per cent and they were generally done at prices higher than the first quarter’s, said CBRE Research.

One striking aspect of last month’s bumper numbers is that sales of homes in the core central or prime region nearly doubled from April to 617 units. This comprised 37 per cent of total sales.

Despite being in the midst of an economic downturn, this region’s May sales have outshone the August 2007 performance by 6 per cent, said Jones Lang LaSalle’s associate director of research, Mr Desmond Sim.

The high-end segment, while still mired in the doldrums, recorded 15 transactions, up from three in April, noted PropNex. Two units at The Orchard Residences atop the Orchard MRT station, for instance, were sold at $2,787 per sq ft (psf) and $3,299 psf - prices that have not been seen for a while.

Sales were also well up in city-fringe areas. There, 609 units transacted at median prices of $735 psf to $1,200 psf over April’s 362 units.

But sales of suburban homes reflecting a median price range of $580 psf to $760 psf fell 16 per cent to 442 units.

The best-selling project last month was the 302-unit Martin Place Residences in Kim Yam Road, which had sales of 186 units at a median price of $1,423 psf.

Buyers flocked there after Frasers Centrepoint cut prices to a seemingly attractive level - initial units at the condo had gone for $1,700 to $2,000 psf last year.

Other popular projects included The Wharf Residence in Tong Watt Road and The Arte in Jalan Datoh. Buyers picked up 140 units at The Wharf Residence at a median price of $1,186 psf and units of The Arte at $933 psf.

Experts said the unexpectedly strong May showing was rather exceptional.

Mr Ismail said the number of transactions this month could well exceed 1,000 units while CBRE Research expects second-quarter sales to exceed 3,500 units.

If the present strong sentiment persists, this year’s new home sales will exceed 10,000 units, which is way above the 4,264 units sold last year and close to the 11,147 units sold in 2006, it said.

Source : Straits Times - 16 June 2009

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Don’t buy S-Reits on high yield spread

Don’t buy S-Reits on high yield spread

Nomura analysts warn against it as they see mis-pricing in retail & industrial

By JAMIE LEE

Investors should not buy S-Reits just because of high yield spreads between Singapore real estate investment trusts and government bonds, Nomura analysts have cautioned.

‘We see the greatest mis-pricing in the retail and industrial sectors,’ said analysts Tony Darwell and Sai Min Chow in a report last week. But they see the negative views in the office sector as having been more than priced in.

Current yield spread between S-Reits covered by Nomura and 10-year Singapore government bonds stands at 543 basis points compared with the five-year historical spread of 324 basis points.

But investing based on higher yield spreads is ’somewhat simplistic’. ‘The low yield spreads of 2005-2008 reflected leveraged acquisitions amid positive rental reversions delivering 16 per cent sector DPU (distribution per unit) growth per annum,’ the analysts noted in the report.

‘We think a supply and demand imbalance in the office, retail and industrial sectors, amid weak economic activity, will underpin a widespread contraction in DPUs as Reit portfolios are faced with rising vacancy and negative reversions (on lease expiry).’

The net take-up in the central business district was a surprisingly low negative 558,418 square feet in the first quarter of this year, the analysts noted. ‘With the demand outlook weakening, vacancy is likely to rise faster and remain higher for longer than expected, suggesting a drawn-out recovery.’

Sliding retail sales are likely to put stress on Singapore’s retail landlords and the new supply of retail space might allow some tenants to bid down rents.

‘As supply increases and retailing activity remains broadly weak, retailers will begin to rationalise the number of outlets and become increasingly selective of mall locations and sensitive to asking rents,’ they said.

With manufacturing output down, industrial landlords will also face declining rents and downward pressure on asset prices.

Nomura has a ‘buy’ call on CapitaCommercial Trust but cut its ratings on Mapletree Logistics Trust to ‘reduce’ and on Starhill Global Reit and Suntec Reit to ‘neutral’ as prices of the latter three stocks have run up recently.

Source : Business Times - 16 June 2009

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Banks tweaking pay to rein in pushy sales staff

Banks tweaking pay to rein in pushy sales staff

This will affect the way products are sold to customers

By CONRAD TAN

(SINGAPORE) Banks here are changing the way they train and pay their front- line sales staff and relationship managers (RMs), in response to recent complaints about mis-selling in the industry and new guidelines on how financial institutions should treat customers.

Mr Raju: We’ve always paid based on a balanced scorecard approach
In public, most banks say their current pay formulas are based on multiple measures rather than just rigid sales targets - to ensure that staff aren’t tempted to push products or services aggressively. Banks also insist that the training received by sales staff - and RMs, who provide more personalised service to wealthy clients - doesn’t just focus on knowledge of products or services but also includes ’soft skills’ such as how best to assess a customer’s needs.

In private, however, several banks here say they plan to tweak - or even overhaul - existing pay structures and training processes. Most of these reviews are in progress, and few banks responded in detail to questions from BT.

But the changes - some of which have already been rolled out - are likely to affect how the banks sell all kinds of products, ranging from unit trusts and credit cards to home loans and insurance. They will also affect the so-called ‘mass affluent’ segment - wealthy people who qualify for more personalised service but aren’t yet private banking customers.

Rajan Raju, head of consumer banking at DBS Group, says the bank has been moving to refine its sales process since last year and changes were introduced in January this year.

‘We now ask more questions to find out about customers’ investment experience and objectives and risk profile,’ he says. ‘We preface all in-house investment products with a summary sheet. And customers must affirm that they have read and understood the product before investing.

‘Where appropriate, we ensure there is a cooling-off period for customers so they can withdraw if they change their mind within a stipulated period.’

In some cases, bank staff also call customers to reconfirm that they understand a product and its risks, Mr Raju adds.

‘Our compensation model has always been based on a balanced scorecard approach,’ he says. ‘This takes into account the quality of the fact-finding process, the financial needs analysis, the suitability of the product and customer satisfaction.’

At OCBC Bank, ‘we are in the midst of implementing a revised remuneration framework for sales staff’, says head of branch banking Phang Lah Hwa. Key changes will include new measures of performance to track sales and service quality, revising pay packages of sales staff to include fixed and variable components, and paying variable remuneration on a deferred basis, she adds.

At United Overseas Bank (UOB) - the only bank to give an estimate of the proportion of fixed and variable pay its sales staff receive - the remuneration of front-line bankers is pegged to a scorecard, periodically reviewed, that includes sales targets but also takes other performance indicators into consideration, says head of sales and distribution Kevin Lam.

Depending on how well staff perform, based on these indicators, the proportion of fixed and variable income changes, he adds. The current average mix is ‘about 65 per cent fixed and 35 per cent variable’.

At Maybank Singapore, training of sales staff ‘has always embraced a knowledge- and risk-based approach’, says head of consumer banking Helen Neo. ‘For the past few months, the training programme has focused on revisiting the fundamentals of financial planning and the reinforcement of risk concepts,’ she says. ‘We have also put in place a more robust post-training assessment process to ensure our sales staff understand what they have been taught.’

In paying sales staff, Maybank takes into account sales of multiple products, quality of sales, competency, delivery attitude and customer feedback, Ms Neo says.

Dennis Tan, director of sales and distribution at Citibank Singapore, says the bank’s compensation structure has evolved over the years ‘to place increasing emphasis on client satisfaction and relationships’.

‘Sales targets, where they apply, are overall revenue goals’, which means there is no incentive to push a particular product, he explains.

Citi’s personal bankers, RMs and wealth management specialists are paid a fixed salary dependent on their seniority, plus variable component that is performance-based, Mr Tan says. ‘A significant portion of the variable component is not related to the generation of revenue, but is pegged to other factors that include adherence to compliance policies, customer feedback and client satisfaction.’

On April 3, the Monetary Authority of Singapore (MAS) issued ‘guidelines on fair dealing’ to financial institutions.

The 35-page document, which supplements the Financial Advisers Act, describes five outcomes that will be used to judge whether banks and other financial institutions here treat customers fairly.

‘We believe the new fair dealing guidelines will help boost public confidence in investment products and revitalise the overall investment climate,’ says Ajay Kanwal, regional head of consumer banking for South-east Asia at Standard Chartered Bank. ‘They promote greater clarity and transparency in both the buying and selling of investment products.’

The pay of Stanchart RMs is based on indicators such as sales performance - ‘with a non-product focus’ - customers’ assets under management, service quality and customer satisfaction, Mr Kanwal says. ‘Another key measure is the number of customer complaints that a front-line staff member receives.’

Monica Wong, chief executive of HSBC’s private banking business in Asia, says its RMs’ pay packages ‘are not commission-based as we do not compromise long-term relationships for short-term gains’.

Source : Business Times - 16 June 2009

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Private home sales keep defying caution

Private home sales keep defying caution

Developers sold year-high 1,668 units in May amid discounts and improved sentiment

By EMILYN YAP
(SINGAPORE) The buds of recovery sprouting in the private home market since February seem to have blossomed in May.

Developer sales for the month hit 1,668 units - a record for the year and 37 per cent more than the 1,214 in April. More transactions also occurred in the high-end sector at prices above $2,000 per square foot (psf).

However, some industry watchers continue to warn that the blooms may not last unless the economy improves decisively. They also remain concerned about weak rental demand and more residential supply coming on stream.

According to data from the Urban Redevelopment Authority (URA) yesterday, developer sales in May put on their strongest showing not just since January, but also since the sub-prime crisis began to rear its head. The 1,668 units sold last month were just 3 per cent shy of the last high of 1,723 units in August 2007.

‘The stockmarket rally which began in mid-March has resulted in positive sentiment that has driven private residential home sales,’ said CBRE Research executive director Li Hiaw Ho. Other consultants noted that lower home prices and immense liquidity searching for higher returns also kept home sales up.

In another sign that sentiment had improved, buying activity continued to return to the high-end core central region (CCR) in May. The launch of 32 units at Rochelle at Newton, for instance, was fully taken up.

Of the 1,668 units sold in May, 617 units or 37 per cent were from CCR. Colliers International pointed out that this proportion far exceeded the much lower 8 per cent seen in February.

Jones Lang LaSalle attributed the higher CCR sales to ‘discounted pricing from developers’, as seen in several projects such as Martin Place Residences, The Wharf Residence and Parc Centennial. At Martin Place Residences, for instance, units were first sold at a median price of $1,746 psf in January 2008. Last month, buyers took up 186 units at a median $1,423 psf.

Not only have sales increased in the high-end property market, more deals struck above $2,000 psf have emerged. According to Colliers, 14 units in May changed hands above that price level, compared with just one in February.

Notably, two apartments at The Orchard Residences went for $2,787 psf and $3,299 psf each last month. Other properties which saw median transaction prices of over $2,000 psf include Boulevard Vue, The Orange Grove, St Regis Residences and Vida.

The mid-market property sector also registered encouraging sales. Colliers noted that some 37 per cent, or 609 units of the 1,668 sold in May came from the rest of central region (RCR); the corresponding proportion in February was 29 per cent.

RCR saw the launch of the 26-unit Spring @ Langsat last month, of which nine units were taken up. Projects such as The Arte and The Mezzo continued to sell well.

Rosy sales aside, some buyers have returned units between April and May. URA data indicates, for instance, a return of 11 units at Mi Casa, three units at Verdure and three units at The Arte.

There are also industry watchers who remain guarded about the recent surge in home sales. This is ‘largely fuelled by softer prices and strong latent demand, which alone will not be sufficient to sustain an overall recovery in the market’, said Jones Lang LaSalle associate director of research Desmond Sim.

‘Unless there are improvements in the overall economy, it may still take quite some time before we see the return of ’super-luxury launches’ . . . Affordability still remains the main factor to entice buyers.’

Citi and Nomura Singapore also said in research reports last week that the property upswing may not be sustainable. Nomura, in particular, expects to see a W-shaped recovery in asset prices because downside risks such as rising unemployment, falling rents and rising supply still exist.

Colliers deputy managing director Grace Ng noted that the Singapore market is ‘a bit peculiar’ because buying is largely spurred by sentiment; many people ‘actually come into the market because they see other people buying . . . rather than calculating yields’.

Even then, rental yields today are likely to be higher than what bank deposits can offer, she added.

Source : Business Times - 16 June 2009

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